I believe you are here to understand how did your risk guys calculated the risk score ! 😁
that what we are going to explain here and give you basic understanding about the risk matrix and visualizing them.
Risk score is a numerical value that quantifies the level of risk associated with a particular threat or hazard. in basic Math and following below formula you should be able to calculate any risk :
Risk Score = Likelihood × Impact
Here where it comes the magic of Risk Matrix. basically, The risk matrix is a method to visualize risks based on defined matrix.
There are three common types of Matrix :
3×3 Suitable for small organization
4×4 Suitable for medium organization
5×5 Suitable for large organization
After you decide which type, you will be able to build the matrix and start placing the risk to get score for each one.
Setting the criteria will depends on various factors such as Industry Standards, Organizational Objectives, Historical Data, Expert Judgment, Regulatory Requirements, Stakeholder Concerns, Environmental Factors and Resource Availability. below example of 3 × 3 matrix criteria that could give you more insight of what criteria definition looks like.
Low (1): Minimal financial loss, no significant operational disruption, no reputational damage.
Medium (2): Moderate financial loss, some operational disruption, minor reputational damage.
High (3): Significant financial loss, major operational disruption, severe reputational damage.
Rare (1): Highly unlikely to occur, less than 5% chance.
Possible (2): Could occur occasionally, 5% to 50% chance.
Likely (3): Expected to occur frequently, more than 50% chance.